CBO: Other Peoples’ Money is Popular, as is Freedom to Choose

The big news on Thursday was that the Congressional Budget Office (CBO) released its score of the American Health Care Act (AHCA). The CBO claimed 23 million people would lose coverage within a decade under provisions found in the AHCA.

About 10 million people would purportedly lose coverage due to the repealing of the individual and employer mandates.

Another 5 million are low-income individuals living in states that did not expand Medicaid.

Basically, this is another way of saying 10 million people will decide they’d rather keep their money than have poor-value health coverage. It’s hard to understand how someone can lose something they never actually had?

Another issue is whether the CBO’s estimates even matter. Its track record projecting Obamacare enrollees was way under what it estimated year-after-year. [See the Figure]

According to the New York Times, the winners would be people who are young, healthy and higher income. By winner, the Times means those who are allowed to keep more of their hard-earned money rather than being forced to throw it down the Obamacare rat hole. The losers would be the people who will not benefit from the aforementioned coerced charity.

Health policy analyst Chris Jacobs explains that the AHCA would reduce deficits by $119 billion over a decade. That’s good for taxpayers.

Health Insurance premiums would also fall, on average, but the exact amount would vary depending on the state in which applicants reside. States would be allowed to apply for waivers from various insurance regulations, including essential health benefits and community rating.

According to Jacobs:

The CBO assumes about half of states will not apply for waiver – maintaining all remaining Obamacare regulations;

One-third of states will opt for moderate waivers;

The remainder of states are expected to apply for more aggressive with waivers.

States opting for no waivers will see very little change in premiums.

In states that apply for no waivers, premiums will fall by perhaps 4%.

States who adopt a moderate approach to waivers can expect to reduce premiums by 10% to 30%, or about 20% on average.

In states that adopting a more aggressive approaches to waivers, healthy individuals will be able to reduce premiums significantly. By contrast, unhealthy individuals may find their costs higher or potentially not be able to buy coverage at all.

The CBO worries that some individuals might opt for limited benefits plans that will not cover all their medical risks. I’m not convinced that’s is bad. Most people do not need comprehensive coverage. Draining the swamp of all the excess cross-subsidies will force providers to compete and be more transparent on pricing.